The Effect of Agency and Mobile Banking on Liquidity of Commercial Banks in Kenya

Abstract

The objective of this research was to determine the effect of agency and mobile banking on the liquidity of commercial banks in Kenya. The research was carried out to establish how agency and mobile forms of banking influenced commercial banks’ liquidity. Banks highly depend on customer deposits and this is of benefit to them if the rate at which withdrawals are done is less compared to the rate of making deposits and it is mainly through the platforms under consideration that an assessment was done to determine the effect they have on liquidity. Most people in this era have access to phones and can easily transact via their phones on a 24-hour basis from wherever they are as long as they have network access and sometimes the internet. The descriptive research design was used to enhance the achievement of the core objectives and the study included 39 commercial banks. Data collected for analysis related to five years from 2016 to 2020. This data was secondary and was extracted from CBK and the individual banks’ websites. The research’s dependent variable was liquidity while the independent variables included; agency banking, mobile banking, bank size (Assets), and the CAR. Liquidity was measured by the current ratio, that is, for the commercial banks while agency banking, mobile banking, assets, and CAR were measured by agency transaction value per total transacted value for a bank, mobile banking transaction value per total transacted value for a bank, the total value of assets and total capital to total risk-weighted assets respectively. At a 95% significance level, the study established that there was a moderate positive relationship between the dependent and independent variables. CAR had the highest impact on liquidity followed by assets, mobile banking, and agency in that order. The benefits attributed to agency and mobile banking are a true reflection of the commitment of commercial banks to capitalize on opportunities to increase the value of transactions and remain relevant in today’s world. These forms of banking have created convenience, reduced costs, served the underbanked, enhanced economic development, and banks’ efficiency in operations. It is therefore recommendable that banks invest more in them but put more emphasis on bank assets and capital adequacy ratio to enhance their liquidity. Agency and mobile banking can lead to more effective operations and profitability. In as much as banks are to invest much in technology, they should also consider the unanticipated events that may influence liquidity like political climate and environment. Overall, the relationship between dependent and dependent variables was at 74% and 55% variations that caused changes in liquidity were explained by the research model.